Crypto Adoption and Traditional Banks

Crypto adoption continues to rise as more users turn to the sector amid rising inflation, broader macroeconomic pressures, and a desire for greater control over their finances.
Amid this shift, where do traditional financial institutions like banks fit? BeInCrypto consulted several experts to explore what the future holds for these institutions in the changing space.

The Future of Banks and Crypto: Conflict or Collaboration?

Fabian Dori, Chief Investment Officer at digital asset bank Sygnum, told BeInCrypto that there is certain competition between banks and crypto. However, what is more significant is the convergence between the two sectors.

He explained that institutional interest in crypto has significantly increased, as evidenced by an exponential rise in firms adopting cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) as primary reserve assets.

Dori highlighted that banks are recognizing crypto’s investment hypothesis and operational benefits, such as real-time settlement and transparency. Meanwhile, crypto platforms are adopting compliance and risk management frameworks like traditional finance (TradFi).

Despite market unpredictability, more institutions view digital assets not as side projects but as necessities.
> “At Sygnum, the conversation is shifting to how to integrate crypto without disruption,” Dori commented.

Shawn Young, Chief Analyst of MEXC Research, noted that banks are reassessing their role as intermediaries.
> “By 2025, banks and crypto will converge rather than conflict, viewing blockchain as the next layer of financial infrastructure,” Young remarked.

Bitget CEO Gracy Chen pointed out that there isn’t a simple conflict nor pure collaboration. Instead, it’s a process of absorption and containment.
> “Most capital in crypto now flows through bank-linked on-ramps and custodians. Institutions want to tame crypto, package it, and extract fees, similar to ETFs and derivatives,” she explained.

Beyond Stablecoins: What’s Next for Banks?

Banks are aware of the competition from the crypto industry. Major American banks are exploring potential stablecoin ventures, not just in the US but globally.

These efforts are increasing amid a significant regulatory shift towards pro-crypto policies, ensuring banks won’t be left behind.

Dori anticipates banks could expand their offerings beyond stablecoins to include tokenized securities, yield-generating staking products, and even launch their own Layer 2 networks geared for compliance.

> “Programmable money allows for faster settlement and new revenue streams. Some banks are exploring crypto-native credit markets, utilizing crypto assets as collateral,” he elaborated.

Chen noted that additional services might include institutional staking-as-a-service and crypto index funds.
> “The future of banking will involve building crypto into the financial system,” she asserted.

Are Banks Ready to Compete in the Crypto Market?

While banks aim to adapt, questions about their infrastructure remain.
> “They won’t rely on the same systems. Working with blockchains requires new tools and partners,” Dori informed.

Compliance remains a major challenge as banks rethink elements from KYC to private key management. Dori emphasized a mindset shift is crucial, explaining that this isn’t just a new asset class but a different pace of operations.

Georgiades pointed to the importance of regulatory compliance, which varies by region.
> “Banks must ensure alignment with regulations, develop secure systems for custody and fast transfers, and educate their teams,” he noted.

Traditional Banks vs. Native Crypto Firms: A New Competitive Era

As more banks enter the crypto space, competition will undoubtedly increase, raising the bar for existing players.
> “Big banks bring scale and trust, likely attracting users uncomfortable with crypto. However, crypto-native firms are well-positioned to offer necessary solutions,” Georgiades stated.

Chen believes banks will compress margins for fintech issuers while retaining the advantage in permissionless DeFi and Web3 integrations.
> “The differentiation must occur through innovation and community governance,” she added.

Dori acknowledged that crypto-native firms hold an edge in speed and product development.
> “As institutions enter, competition will foster progress, benefiting those focused on user experience and technology,” he concluded.